State aid: Commission adopts temporary
framework for Member States to tackle effects of credit squeeze on real economy

The European Commission has adopted, under EC
Treaty state aid rules, a temporary framework providing Member States with
additional possibilities to tackle the effects of the credit squeeze on the real
economy. The Framework forms part of the measures announced by the Commission in
its 26th November European Economic
Recovery Plan (see IP/08/1771)
and was approved in record time following consultation with Member States. Due
to the drying up of the lending market, even healthy companies may not be able
to get the finance they need. This may seriously endanger their business. The
new framework therefore introduces a number of temporary measures to allow
Member States to address the exceptional difficulties of companies to obtain
finance. In particular, Member States will be able to grant without notification
of individual cases subsidised loans, loan guarantees at a reduced premium, risk
capital for SMEs and direct aids of up to €500,000. All measures are
limited until the end of 2010 and subject to conditions. Based on Member States'
reports, the Commission will evaluate whether the measures should be maintained
beyond 2010, depending on whether the crisis continues.

Competition Commissioner Neelie Kroes said: "We must fight the crisis, not
each other. State aid must be targeted at allowing companies, especially SMEs,
to overcome financial problems arising from the current credit squeezewithout worsening the situation for other companies, thereby aggravating the
crisis. Together with the existing possibilities to support smart investment in
sustainable growth, the new measures will give new opportunities to Member
States to bring the economy back on the right track."

The Framework will facilitate the tackling of thecurrent difficulties
in the economy First, to ensure sufficient bank lending to companies; second, to
allow companies with liquidity problems due to the crisis to benefit from
temporary relief through a limited grant; and third, to encourage companies to
continue investing into a sustainable future, including the development of green
products.

In order to meet these objectives, Member States may grant, under certain
conditions and until the end of 2010 e.g.:

a lump sum of aid up to €500,000 per company for the next two years,
to relieve themfrom current difficulties

state guarantees for loans at a reduced premium

subsidised loans, in particular for the production of green products
(meeting environmental protection standards early or going beyond such
standards)

risk capital aid up to € 2.5 million per SME per year (instead of the
current €1.5 million) in cases where at least 30% (instead of the current
50%) of the investment cost comes from private investors.

The
Commission expects the financial markets, and hence the provision of lending to
businesses, to get back to normal in the foreseeable future. Therefore, the new
measures addressing the exceptional circumstances in the financial markets are
limited in time and expire at the end of 2010.

Member States will have to notify schemes to the Commission that fully comply
with the above-mentioned types of aid. As it has done since the beginning of the
crisis, the Commission will act quickly provided Member States cooperate fully,
provide adequate information and follow the rules. Once schemes are approved,
aid given to individual companies will not have to be notified.

Over the last couple of years, the Commission has thoroughly reformed its
state aid rules. As a result, Member States now have a set of up-to-date rules
for granting horizontal aid to stimulate e.g. research, innovation,
environmental protection and regional development. See MEMO/08/659
and MEMO/08/660
for more details.